International Monetary Fund and the Hegemonic Project

By Faiz Ahmed

Oakland University

The United States is an empire and has army bases all over the world. They have bases in Japan, Middle East, Africa, Asia, Europe, South America etc. The United States is a worldwide military Hegemonic power. But the United States is also a global economic Hegemony.

The very basic principle that guides US foreign policy regarding US economic stability is not to let any other power reach the same level as it enjoys. Chalmers Johnson quotes Friedrich List is his book “The Sorrows of Empire”,

“It is a very common clever device that when someone has attained a summit of greatness, he kicks away the ladder by which he climbed up, in order to deprive others of the means to climb up after him” --- Friedrich List (Johnson 2005, pg262).

This is a very true statement. The USA is a world power. It got to this level because of its economic and technological superiority and the ability to produce inexpensive goods before the world wars. While Europe, the then world super powers were wrecking themselves, the US was selling them weapons and supplies. Today the USA is an Empire; it has the best military, economic developments, advancements and achievements to show tucked in its belt.

The Hegemonic Project is the program which the US has used to extend influence over the world. Militarily and economically. In 1981, the US introduced a strategy to undermine the economic development of the East Asian countries that tried to follow Japan’s model of State Assisted Capitalism. The US also wanted to prevent the third world from “organizing into a power bloc to be able to negotiate equitably with the rich countries” (Johnson 2005, pg 264).

To attain this end the US used the World Bank and the IMF. Johnson mentions that the IMF and the World Bank are subsidiaries of the US treasury. (Johnson 2005, pg 262)

In the 1980s the US instructed the IMF to basically act as a loan shark to the third world countries. The world bank would loan underdeveloped countries loans for “Structural Adjustment” to pay back its debts in small payments and as a condition the IMF would impose draconian conditions that rendered the countries unable to make their own economic policies. The conditions usually imposed only made matters worse and made the countries more unwillingly dependant on foreign capitalists. The IMF ensured that the country drop all state sponsored controls on foreign investment, reduce spending on social programs and thereby, pay off its debts. Governments were forced to then cut government spending like government pension, road construction, farmland irrigation projects, subsidized food programs etc under the threat of sanctions, US military intrusion, and national destabilization through overt and covert means.

The IMF foreign investment clauses also caused huge damages to local industry. It resulted in massive destabilization of the local industries as they had to compete with larger foreign multinational corporations that had huge market shares and economies of scale. (Johnson 2005 pg 266-267)

The US had instructed the IMF and the World Bank to “keep the debtor countries paying something so that official defaults could be avoided” and to “squeeze as much money out of them as possible”. (Johnson 2005 pg 266)

This made these countries unable to develop on their own and made these countries go deeper and deeper into social decay and national debt.

No more competition for the USA.

The justifications that the US used were concepts like free trade between nations, global village and other pretty sounding pseudo philosophies of materialism bringing happiness.

The philosophy of globalization stems from the ‘Neo Liberal’ economic philosophy. Neo Liberalism is an economic philosophy that in effect calls for a free market. The Liberation of the market so that it can take care of itself, without government controls, without tariffs on trade.

Johnson in his book “The Sorrows of Empire” mentions that ‘Neo liberalism’ also goes by the name of ‘Washington consensus’, ‘neoclassical economics’ and ‘globalization’ (Johnson 2005, pg 260).

This philosophy of neoliberalism, it is a global form of unfettered capitalism and is the complete opposite of communism and socialism.

It basically says that the nations of the world should be free to trade with one another without tariffs and capital controls. It sounds beautiful to hear this. But the problem is that it was a way for foreign companies who had years of experience with cutthroat competition, whose management techniques and marketing expertise had reached a unique level of expertness, which had market shares so big that they could manufacture massive amounts of products with low expenses and sell those products at a good price and even at prices so low that they could effectively run the homegrown industries into the ground. The citizens of most of these countries also seemed to take it as a matter of pride to obtain foreign products. It was the status symbol of the rich and the proud.

India as most of us are familiar went through that phase. The social media, the movies etc captured this phenomenon well. One song that comes to my mind is “Mera joota hai Japani, yeh patloon Englistani, sar pe lal topi Roosi, phir bhi dil hai Hindustani” --- translation – “my shoes are from Japan, my trousers from England, my cap from Russia, yet my heart is Indian”

Somebody should have then pulled his coat and told him, “good job!!! You have not contributed to a single industry in your own country, thereby contributing to the destabilization of your homegrown producers and brag about how your heart is still Indian!!!”

The citizens of those countries then flocked to these corporations for employment and incorporated themselves into the workforce (and then they had the audacity to believe they were free of colonization).

The US foreign policy uses this philosophy as it’s most basic and fundamental guiding principle. Many countries have resisted the encroachment of foreign companies in their closed markets and many times the US has staged regime changes in these countries to ensure the continued accessibility for their corporations to those consumer markets.

The US, has sought to open more military bases all over the world to ensure its continued influence and to make sure that other nations do not rebel and leave this ‘Pax Americana’, this global economy.

Before this century, there were certain cities that were economic centers of trade and commerce. However in this new economic model, there has been massive decentering and economic activity is not concentrated in one city like London, Paris or New York. There are many centers of trade and the USA furthered this so as to capitalize on all of those markets. Wendy’s and KFC, McDonalds and Shell, Wal-Mart and Starbucks, they all now have access to the urban populations of these economic client states. You will find them in Jeddah, in Cairo, in muscat, in Karachi, in Hyderabad, in Singapore etc.

The IMF and the World Bank were used to open up these markets. They were used and are still used to horribly destroy the infrastructures and the home grown industries of these countries.

Recently Pakistan had its own bout of the IMF disease. The Pakistan People’s Party agreed to raise taxes to pay to the IMF and introduced a bill in the Parliament. Of course this caused huge political ruckus and left the kleptocratic leaders (Kleptocracy – government comprising of thieves) on their own as not only the opposition leaders but even its allies in the coalition government refused to support the bill and threatened political retribution.

However what goes around comes around. China which had a closed economy for years has now opened its economy, only to dump their inexpensive products into American markets. After years of struggling in an increasingly difficult market, Tata of India has created a car for a price that Europe or America cannot compete with because the trade unions of the US and Europe drove the prices and the standards of living for American workers up, thereby killing the price bargaining upper hand that the US corporations had before. And Rick Snyder, the new Governor of Michigan sold Gateway, an American company to Korea thereby effectively betraying the American work force.

These are the ways that the US reached global hegemony economically and militarily.

First Published in East West Link - ewlnews.com